Netflix announces the end of the boom triggered by the coronavirus pandemic

The leader of video on demand still pulverizes its growth objectives and names Ted Sarandos “co-CEO” next to Reed Hastings.

Netflix continues to amaze. During the spring, the confinement, but also the disappearance of sport on television, strongly favored the massive recruitment of new subscribers for the first video on demand platform. The Los Gatos (California) firm announces an addition of 10.1 million new paying customers during the second quarter. That’s roughly two million more than expectations. Nearly 193 million households around the world, including 66 in the United States, have now joined Netflix, a company which, until 2007, only rented DVDs of films by mail order…

As in April when the publication of its first quarter performances, Netflix is ​​careful not to promise that the rallying wave for its formula of films and original series will continue to grow. On the contrary, it announces the end of the boom generated by the pandemic, forecasting an increase of only 2.5 million subscribers for the current quarter. This is taking Wall Street on the wrong foot, because analysts were counting on twice as much.

Third surprise: the boss and founder of the communication empire chooses this moment to announce that he will now share his responsibility with his friend and right-hand man for years, Ted Sarandos. The latter, aged 55, works from Los Angeles where he already assumes the functions of studio manager as “content boss” of Netflix. Reed Hastings, 59, continues to operate from Los Gatos in Silicon Valley. “Let things be clear: I’m still in place for a decade,” he says.

This cocktail of information triggered a plunge of more than 9% in Netflix’s price outside of the Nasdaq market’s trading hours. But the drop should be seen in the context of a 63% surge in the share price since the start of the year.

With Amazon, Microsoft, Facebook and Zoom Video Communications, the Californian company is one of the big winners in the new lifestyle created by the covid 19 pandemic. Netflix currently weighs some $ 230 billion on the stock market, or a little more that Disney, the world’s leading communications group, whose new video-on-demand platform, Disney +, is certainly enjoying great success, but whose traditional theme park, cinema and television activities are weighed down by the coronavirus and the recession global.

Freezing of the shootings

Netflix doesn’t owe everything to containment. The richness and diversity of its program offering, which is based on massive production budgets much higher than those of its rivals, are at the heart of its model. The platform has released more than 30 original films since the lockdown began in mid-March. We count among them Extraction, which broke Netflix audience records in its first four weeks.

Netflix is ​​like other studios almost completely unable to shoot new productions normally due to containment, travel restrictions and distancing rules in force. The activity nevertheless resumed in several European countries including France and has never stopped in South Korea.

But Reed Hastings maintains that the platform still has enough programming to fuel its offering this year and during the first half of 2021. However, competition from multiple rival video-on-demand services, with beyond Disney + , HBO Max, from WarnerMedia, but also Peacock, just launched by NBCUniversal, also helps to make Netflix cautious about its growth objectives.

Among other surprises Netflix reveals that most of its new subscribers in the last three months have come from the United States and Canada and not from other parts of the world as is generally the case. 2.94 million new customers in America and Canada have bet on Netflix, compared to 2.75 million in Europe, the Middle East and Africa, 2.66 in Asia and 1.75 in Latin America.

In this context, during the quarter, Netflix posted a turnover of 6.15 billion dollars, against nearly 5 last year at the same time. Its quarterly profits climb from $ 271 million to $ 720 million. For the second consecutive quarter, the group maintains a positive cash flow.